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Worldwide "Westing" Match

Britain's BNFL puts Westinghouse up for sale.

It's been more than two months since Britain's state-owned nuclear company, BNFL, began hinting that it might sell off its U.S. subsidiary, Westinghouse. In June, BNFL confirmed that it had received more than a dozen unsolicited bids from potential acquirers. Analysts opined that Westinghouse would make a nice fit with General Electric(NYSE:GE) and put a tentative fair value of $1.8 billion on the subsidiary.

It looks like they were half right: $1.8 billion is indeed the starting bid, but on Saturday, Japan's Mitsubishi Heavy Industries became the first bidder named.

Critics, including BNFL's own labor union, are panning the deal before it's even been made official, however. With BNFL running at a loss, they argue that Westinghouse's British parent is trying to raise cash at just the wrong moment as Westinghouse seems poised to ride the wave of nuclear energy's renewed popularity.

Over in China, Westinghouse is part of a consortium of companies bidding on a $6 billion project to build four nuclear reactors. Back home in the U.S., President Bush has made nuclear energy a cornerstone of his energy plan, and Westinghouse looks likely to benefit. Just last year, the company joined up with GE, EDF International, Exelon(NYSE:EXC), Entergy(NYSE:ETR), and twin Motley Fool Income Investor picks SouthernCompany(NYSE:SO) and Constellation Energy(NYSE:CEG) to design a next-generation nuclear power plant. The administration is supporting the companies' efforts with an accelerated review procedure designed by the Department of Energy.

All of which suggests that BNFL's "Prospect" labor union has a valid point. After all, when BNFL bought Westinghouse as part of CBS' restructuring in 1998 (just prior to Viacom's (NYSE:VIA) acquisition of CBS), the British company paid $1.2 billion. Seven years later, it looks likely to make just a 50% profit on the sale of the subsidiary. Considering that the S&P 500 has historically doubled in value every seven years, BNFL would have been better off investing its money in an index fund.

Combine that argument with Westinghouse's potential for explosive profits in the years to come and the labor union's argument that British jobs will be lost through the sale, and I think we will see one of two outcomes here: a much higher sale price or British government intervention to nix the sale.

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